Prac ce Management
Want to Build a Sound Re rement Plan? Start With These Three Essen al Steps
Provided By: Tom Weilert & Karin Larrave, Northwestern Mutual
Like most people, you may find it difficult to predict what you’ll be doing a year from now, let alone in one or
more decades. Yet the ability to project into the future may be crucial to making long‐term financial goals more
achievable, according to a recent study. In fact, researchers at Stanford University reported in the Jo urnal of
Marke ng Research (Volume XLVIII, November 2011) that people who took me to imagine themselves as
re rees reported that they would save twice as much as those who didn’t.
It makes sense. In order to save enough for a financially secure re rement, you first need to know what you
want your re rement to look like. It is only then you can create a plan that takes into account the three essen al
components of a sound re rement plan: protec ng your assets by managing the risks of re rement, crea ng
income that lasts your life me, and planning your legacy.
Visualizing Your Goals
The process of wealth accumula on typically begins when you start earning a paycheck and con nues
throughout your career. It involves a consistent plan of saving and inves ng to help you build financial security
for the future. But how much savings will you need? The answer depends on the lifestyle you hope to have in
re rement. Start by imagining life once you stop working: Where would you like to live? What ac vi es would
you like to pursue? How much travel do you plan on doing? Do you see yourself volunteering? Working part
me? Pursuing new educa onal or business interests?
The clearer the picture, the easier it will be for you to quan fy what you’ll need to make your goals a reality. If
you’re married, don’t forget to get your spouse’s input. Your partner is likely to have his or her own views on
what cons tutes a comfortable re rement.
Step 1: Protect Assets by Managing Re rement Risks
As you think about your re rement goals, it’s crucial to also understand and manage six key risks that can impact
your financial security in re rement. Those risks include (1) longevity risk and the very real possibility that your
re rement income may need to last three or more decades once you stop working; (2) market risk and the
chance that a market downturn could significantly impact the amount of money you may have to live on in the
future; (3) infla on and tax risk, and how both can take a significant bite out of your budget; (4) health care risk
and the damaging affect rapidly increasing medical costs may have on your future financial security; (5) long‐
term care risk and the possibility that you may require unexpected extended care in the future—that’s not
covered by Medicare; and (6) legacy risk and the need to balance your desire to provide for your heirs with the
need to fund your own re rement.
Con nued online with steps 2 and 3 here.
This content was provided by Northwestern Mutual. Northwestern Mutual
has partnered with ACOMS as an affinity partner to provide discounted long‐
term care and disability planning to ACOMS members.
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